44 - ECON 3600 Assignment 4 Solutions 1. Exercise 68.1 in...

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ECON 3600 Assignment 4 Solutions 1. Exercise 68.1 in Osborne's An Introduction to Game Theory . If at least two of the prices are equal to c and everyone else's price is ≥ c, then everyone's profit is zero. If any individual firm switches to a price below c, then they have a loss. If any individual firm switches to any other price ≥ c, then they still have a profit of zero. Thus, no individual firm has a net gain from switching prices, so this is a Nash Equilibrium (NE). If any firm's price is less than c and less than everyone else's price, this not a NE because that firm would gain by switching to any price ≥ c. Thus, it can never be a NE if any firm's price is less than c. If only one firm's price is set to c, while everyone else's is > c, then the firm with a price set to c would gain by increasing their price to just below the next lowest price, so this can't be a NE. If everyone's price is > c, then an individual firm can increase their profits by charging a price less than everyone else, so this can't be a NE. 2. (From Watson's
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This note was uploaded on 03/27/2012 for the course ECON 3600 taught by Professor Daniel during the Spring '12 term at Dalhousie.

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44 - ECON 3600 Assignment 4 Solutions 1. Exercise 68.1 in...

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